Chevron to acquire Hess for $53 billion in latest major oil deal

Chevron, the US energy giant, said Monday that it had agreed to acquire Hess, a medium-sized rival, in an all-stock deal valued at $53 billion.

The deal marks a further consolidation of the energy industry, especially in the United States, where smaller companies appear to be taking advantage of relatively high oil prices to join forces with bigger players. The transaction follows Exxon Mobil’s $60 billion purchase of shale driller Pioneer Natural Resources this month, another sign of confidence among large industry players in the future of fossil fuels even as policymakers promote cleaner energy sources.

In a news release, Chevron said the acquisition would diversify its portfolio. Hess would add about 10 per cent to Chevron’s overall oil and gas production of about 3 million barrels a day.

Mike Wirth, Chevron’s chair and CEO, said in a statement that the deal enhances the company’s operations “by adding world-class assets.”

Hess has a strong position in Guyana, where major oil discoveries have been made in recent years and where Chevron’s rival, Exxon, is the key operator. Hess is also a leader in the Bakken shale area of North Dakota.

John Hess, the CEO of Hess, is expected to join Chevron’s board.

In a note to clients Monday, Biraj Borkhataria, an analyst at RBC Capital Markets, said it was surprising that Chevron had struck a big-ticket deal when Exxon, the company’s main rival, appears out of the hunt because of its multibillion-dollar Pioneer purchase. He figured that Chevron “could bide its time.”

Borkhataria said Hess would give Chevron “a stronger, more diversified portfolio, which should bode well for shareholders over the long term, but in the near term, the news could weigh on the shares.”

In premarket trading, Chevron shares were down about 2.5 per cent.